Income Up Only 1.2% Last Year

AP

Published: January 29, 1988

WASHINGTON, Jan. 28—
Americans' after-tax incomes grew a sluggish 1.2 percent last year, the poorest showing since the last recession, while their savings rate in 1987 fell to a 40-year low, the Government reported today.

Economists expressed concerns that these weak showings would lead to a further slowdown in consumer spending and raise the possibility of a recession this year.

The Commerce Department report also showed that consumer spending, after adjusting for inflation, rose just 1.8 percent last year, less than half the growth rate of the previous two years.

Since consumer spending accounts for two-thirds of overall economic activity, further weakness in this area, especially without offsetting strength in other sectors, could be enough to produce a recession. Poorest Showing Since '82

The 1.2 percent gain in Americans' disposable, or after-tax, incomes last year followed growth of 4 percent in 1986. It was the poorest showing since the recession year of 1982, when after-tax incomes grew by six-tenths of 1 percent.

With slower growth in incomes, Americans had less money to put into savings, resulting in a drop in the savings rate to 3.8 percent, the lowest since a 3.1 percent rate in 1947. The savings rate, which represents savings as a percent of disposable income, was 4.3 percent in 1986.

The department reported that incomes in December, before adjusting for inflation, rose seven-tenths of 1 percent while personal consumption spending advanced five-tenths of 1 percent, the same gain recorded in November.

The recovery since the 1981-82 recession has been powered by strong consumer spending. Economists are hoping that a rebound in American export sales, aided by the decline in the value of the dollar, will be enough to offset the expected further slowdown in consumer spending. 'Spending Boom Is Esentially Over'

''The consumer spending boom is essentially over,'' said Lawrence Chimerine, head of the WEFA Group, an economic consulting firm. ''People have gone about as far as they can go by cutting their savings rate and going deeper into debt.''

Mr. Chimerine said while the fall in the value of the dollar had bolstered the fortunes of American manufacturing companies, consumers were facing a rise in inflation as foreign goods became increasingly expensive in the United States.

In a report Thursday, the Labor Department said the price of imported goods shot up 14.8 percent in 1987, the biggest increase in import prices since the Government began keeping these statistics in 1983. Before 1987, import prices had actually declined four consecutive years, including a drop of 8.6 percent in 1986.

The Government said the swings in incomes for December and November, when incomes fell five-tenths of 1 percent, were influenced primarily by changes in subsidy payments to farmers and a retroactive payment to postal employees in December.

Without the special factors, income growth would have been six-tenths of 1 percent in November and five-tenths of 1 percent in December. PERSONAL INCOME AND OUTLAYS Billions of dollars, seasonally adjusted annual rates: Change Dec. from Nov. Income $3,864 +0.7% Outlays 3,128 +0.5%

Graph of total personal income, before taxes, July 1986-Dec. 1987 (Source: Commerce Department)